Supporting the Recognition under Massachusetts State Law of the Joint Defense Privilege or Common Interest Rule

On August 3, 2007, the Massachusetts Supreme Judicial Court rendered a unanimous decision adopting the so-called joint defense privilege, which allows parties with a common legal interest to share privileged information without waiving that privilege.  The Court agreed with NELF, both that the doctrine should be adopted and that it is more appropriately called the common interest doctrine.  According to NELF’s research, reflected in the amicus brief which it filed in the case on behalf of itself and the Associated Industries of Massachusetts, this decision brings Massachusetts in line with 39 other states (including all New England states other than Rhode Island, which is silent on the question) that have embraced the doctrine.  The Court agreed with NELF that the doctrine extends to consultations between counsel to parties to business transactions where there is a common legal interest and is not limited to the litigation context.  The Court further agreed with NELF and others that no written agreement is necessary; it is the sharing of privileged communications between counsel to parties having a common legal interest that gives rise to the protection, not a writing.  And one need not demonstrate a client’s knowledge of or consent to the sharing of the privileged communications. The Court also rejected an assertion by Hanover that the interests of the parties must be identical, rather than just common. The Court adopted an approach whereby one focuses on the general purpose for sharing of the communication such that an interest is “common” where parties “share a sufficiently similar interest and attempt to promote that interest by sharing a privileged communication.”  Where defendants allege a joint effort to establish a common litigation defense strategy, they need only prove that the communications were made in the course of a joint defense effort, the statements were designed to further that effort, and the privilege has not been waived.   

The decision provides considerable comfort to practitioners, who have been relying on trial court decisions recognizing the doctrine in the absence of appellate confirmation of its validity.  With this question resolved, counsel to aligned businesses can comfortably engage in the coordination necessary to mount effective and thorough cases in multi-party litigation and to effectuate multi-party business transactions.

Arguing that an Insufficiently Noticed and Improperly Recorded Eminent Domain Taking is Ineffective Against a Subsequent Bona Fide Purchaser

On July 19, 2007, the Massachusetts Supreme Judicial Court rendered a unanimous decision in the case of William J. Devine v. Town of Nantucket, 449 Mass. 499 (2007), that upholds the integrity of the state’s recording system as a means of identifying title defects.  The case involves a purported eminent domain taking by the Town of Nantucket of property adjacent to the Nantucket Memorial Airport that the Town had inadvertently removed from its tax rolls and thereafter listed as owned by “owners unknown.”  When the Town later decided to take the property by eminent domain for potential Airport expansion, it made no effort to locate the actual property owner, who thus had no notice of the taking.  For decades the Town neither took physical possession of the property nor made any effort to demarcate it as Town property.  Since the taking was recorded against “owners unknown,” the actual property owner’s name did not appear in the grantor index in connection with the taking.  For all of these reasons, the taking could not be discovered by a reasonable title search and was not discovered when Devine subsequently purchased the property.  The property was thereafter returned to the Town’s tax rolls, the back taxes were paid, and septic system and building permits were issued by the Town for construction of a house on the property.  Nantucket subsequently revoked the building permit, asserted that its taking was valid as against Devine, and argued in the ensuing  litigation that the recording of a taking need not be accurate as to the identity of the property owner provided it contains a description of the property.  

NELF filed an amicus brief arguing that Devine’s rights as a bona fide purchaser without knowledge should trump those of Nantucket where the Town failed to make reasonable efforts to locate the owner of the property, failed properly to record the order of taking so as to apprise future purchasers of it, and failed to make any use of the site for decades.  NELF argued, and the Court agreed, that the Massachusetts takings statute, G. L. c. 79, § 3, read in conjunction with state recording statutes, G. L. c. 36, c. 183, §§ 29-42, and c. 184, §§ 15- 35, calls for a recording sufficient to inform the owner and potential purchasers of a taking and not merely the ministerial act of filing a notice that will never be found.

Advocating a One-Year Statute of Limitations for All Employment Discrimination Claims Brought Under Rhode Island’s Anti-Discrimination Statutes

Unlike the Rhode Island Fair Employment Practices Act, R.I. Gen. Laws §§ 28-5-1 et seq., (“FEPA”), which expressly provides for a one-year statute of limitations, the Rhode Island Civil Rights Act, R.I. Gen. Laws §§ 42-112-1 et seq., (“RICRA”) includes no express limitations period.  In Horn v. Southern Union Co., 927 A.2d 292 (R.I. 2007), the Rhode Island Supreme Court was faced with the question whether, as NELF and its co-amicus Defense Counsel of Rhode Island argued, employment discrimination claims under RICRA should also be governed by a one-year limitations period or whether they should instead be governed by Rhode Island’s residual three-year statute of limitations for personal injury actions.  

In a decision rendered on June 27, 2007, the majority of the Court agreed with NELF that FEPA and RICRA are in pari materia with respect to employment discrimination claims—i.e., that they address the same subject and, hence, must be harmonized by “engrafting onto the RICRA the one-year statute of limitations contained in the FEPA.”  The Court found, as NELF had argued, that setting a three-year limitations period for RICRA employment discrimination claims would effectively repeal FEPA’s protection of employers from stale claims, since plaintiffs could obtain the same remedy without the burden of the one-year limitations period by proceeding under RICRA.  As NELF explained in its amicus brief, requiring claims to be brought promptly is especially important in the employment discrimination area because those claims are often based on alleged oral communications, memories of which can quickly fade, and because witnesses can readily become unavailable given today’s high worker turnover.  Dissenting Justices Suttell and Flaherty, who would have applied the three-year statute of limitations, faulted the majority for fashioning a special limitations period under RICRA limited to employment discrimination claims.

Opposing Judicial Expansion of the Scope of the Massachusetts Environmental Policy Act

This case involves a proposed bioterrorism laboratory to be sited by Boston University at the BU Medical Center site in Boston.  The decision of the Superior Court under review raises two issues of first impression for the Massachusetts Supreme Judicial Court regarding the scope of the environmental impact review process for proposed projects under the Massachusetts Environmental Policy Act, G. L. c. 30, §§ 61-62H, (“MEPA”).  The trial court decided that BU’s environmental impact report was inadequate because it failed to address the risk of direct human-to-human contagion and because it did not evaluate possible alternative site(s) in a more rural part of the state.  If upheld, the trial court decision would effectively write the word “environmental” out of MEPA by extending its purview to direct public health impacts in the absence of any environmental impact giving rise to the perceived health risk.  The decision below would also empower the state to require that private project proponents evaluate alternative locations for their proposed projects even though no public agency can require a private party to pursue a voluntary project at other than its proposed location.  In response to the Court’s solicitation of amicus participation, NELF filed a brief on August 17, 2007, for itself and the Associated Industries of Massachusetts.  NELF argued that MEPA does not apply to impacts on human health unless they arise from an impact on the natural or physical environment, such as air or water pollution, and that MEPA does not contemplate review of alternative sites.  The brief relies on key statutory and regulatory language and comparable language in other state environmental statutes, as well as the purpose of the MEPA review process and its relationship with other governmental programs.  For the first issue the brief also relies on a decision of the U.S. Supreme Court that is directly on point under the federal counterpart to MEPA, the National Environmental Policy Act, 42 U.S.C. §§ 4321-4347. 

Opposing Regulatory Takings Without Just Compensation

On September 25, 2007, the Federal Circuit Court of Appeals rendered a decision in this case addressing the doctrine that one must view the “parcel as a whole” in evaluating an alleged regulatory taking under the Fifth Amendment.  The Court of Federal Claims had held that the Low-Income Housing Preservation and Resident Homeownership Act of 1990, Pub. L. No. 101-625, 104 Stat. 4249 (1990), and predecessor emergency legislation (collectively “LIHPRHA”), which for eight years effectively barred owners of multifamily housing projects subject to affordability restrictions from exercising contractual rights to pre-pay their mortgages and convert their buildings to full market-rate rents, effected a temporary taking.  The Federal Circuit, in an opinion that dissenting Circuit Judge Newman complains effectively revokes the court’s own 2003 decision in this case, ruled that the trial court’s methodology, supported by NELF, did not properly consider the impact of the regulation on the “parcel as a whole.”   The trial court had applied a “return on equity approach,” which compared the return the owner received on its investment for each one-year period under the challenged law to a hypothetical return on its investment without the statutory restriction.  

NELF had argued in its brief that this approach by the trial court properly reflected the actual loss caused by the regulatory change, namely the substantial diminution of the building owners’ rental income during the period when the statutes prevented pre-payment.  NELF argued that, if investors come to believe they will not be compensated fairly when the government fails to keep its regulatory promises aimed at attracting their investment in a socially desired program, they will either not invest in such programs or will require higher returns, to the detriment of all taxpayers and the very people whom the government is seeking to help (here, families in need of affordable housing).  

Rejecting NELF’s position, the court remanded the case and instructed the lower court to apply standards that appear designed to result in a determination that no regulatory taking has occurred despite clear and costly defeat of property owners’ reasonable investment-backed expectations. Cienega Gardens petitioned the U.S. Supreme Court for a writ of certiorari and NELF filed a brief in support of that petition reiterating the key arguments made in its previous brief.

Arguing for an Interpretation of the “‘Strong Inference’ of Scienter” Requirement under the Private Litigation Reform Act of 1995 Consistent with Congress’s Intention to Limit Frivolous “Strike Suits” under Section 10(b) of the Securities Exchange Act of 1934

On June 21, 2007, the United States Supreme Court issued its decision in the case of Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (2007).  Agreeing with NELF, the Court rejected a Seventh Circuit pleading standard that would have encouraged frivolous private securities fraud actions.  Justice Ginsburg delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Kennedy, Souter, Thomas and Breyer.  The decision construes the requirement in the Private Securities Litigation Reform Act of 1995 (“PSLRA”) that, for a securities fraud complaint under Section 10(b) of the Securities Exchange Act of 1934 to survive a motion to dismiss, the allegations of the complaint must create a “strong inference” of scienter, or fraudulent intent.  The Seventh Circuit decision under review allowed claims to proceed provided plaintiffs alleged facts from which a reasonable person could infer fraudulent intent.  The Supreme Court held that, under the “strong inference” requirement, the inference of scienter “must be more than merely plausible or reasonable—it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.”  Justices Scalia and Alito filed concurring opinions in which each adopted NELF’s proposed interpretation of the “strong inference” requirement as necessitating an inference of fraudulent intent that is more plausible than the inference of innocent intent.  As Justice Scalia reasoned, there is “no indication that [the PSLRA] was meant to relax the ordinary rule under which a tie goes to the defendant.”  Both concurring Justices acknowledged, however, that the Court’s test would likely lead to the same results as a practical matter.  Justice Stevens dissented from the opinion of the Court, arguing for a probable-cause standard.